That number puts China far behind the U.S., where nearly three quarters of the 818 feature films produced in 2011 were released in theaters, according to the most recent statistics from the Motion Picture Association of America (pdf).

The report comes at a time when things are looking up for China’s film industry. China recently overtook Japan to become the world’s second-biggest movie market behind the U.S., according to the MPAA. Meanwhile, The recent success of domestic hits “Lost in Thailand” and “Journey to the West: Conquering the Demons” – both of which broke box office records this year – has many in China feeling optimistic that local filmmakers may finally break Hollywood’s choke hold on the market.

But the failure of so many Chinese films to make it into theaters serves as a reminder of the limitations the industry still faces, analysts and observers say. China Real Time has more.